RachelKoning Beals

Gold prices dropped Thursday, marking their lowest finish since early August, as the dollar’s decline against the euro lifted a key benchmark for the greenback to a three-month high.

The dollar’s strength dulled demand for precious metals, as a firmer dollar makes them less attractive to investors using another currency.

December gold
US:GCZ7
fell $9.40, or 0.7%, to settle at $1,269.60 an ounce. The settlement was the lowest since Aug. 8, according to FactSet data. The SPDR Gold Trust
GLD, +0.24%
fell 0.8%.

“Between Fed chair talk and the European Central Bank’s monetary policy announcement, it was an incredibly lively day in the foreign exchange market, particularly when the ECB announced its QE changes minutes before Politico reported that [current Fed Chairwoman Janet] Yellen and [former Fed Gov. Kevin] Warsh are out of the Fed chair race,” said Kathy Lien, managing director of currency strategy for BK Asset Management, in an email update.

“ECB taper of bond purchasing is dovish,” said Jeff Wright, chief investment officer at Wolfpack Capital, putting pressure on the euro
EURUSD, +0.3609%
which dropped 1.3% against the U.S. dollar. The ICE U.S. Dollar Index
DXY, -0.31%
was up 1% at 94.612, trading at levels not seen since July.

Analysts also attributed the greenback’s recent strength to bets that the U.S. Federal Reserve’s next leader will pick up the pace of interest-rate hikes or at least stay the course with plans for gradual rate increases late this year and next. The President Donald Trump is expected to announce his choice before starting a trip to Asia on Nov. 3.

Meanwhile, “gold will shake off minor economic reports such as U.S. weekly jobless claims and U.S. homes sales,” Wright said. Data Thursday showed a wider U.S. trade deficit and an uptick in still-low weekly jobless benefits claims.

After that data, the benchmark 10-year Treasury yield
TMUBMUSD10Y, +0.12%
pulled back slightly, then edged up—holding ground at its highest level since March. Gold, which doesn’t yield interest, typically moves in the opposite direction to U.S. bond yields, because it becomes less attractive to investors.

Wright said gold could “retest $1,275 without clear direction by early next week.”

Among other metals, December silver
US:SIZ7
ended at $16.811 an ounce, down less than 0.7%. The iShares Silver Trust
SLV, -0.15%
declined by 1.1%.

December copper
US:HGZ7
fell 0.2% to $3.178 a pound, January platinum
US:PLF8
fell 0.5% to $922.10 an ounce, while December palladium
US:PAZ7
gained 1% to $968.10 an ounce.

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